Sweden has lots of wealth inequality

From Tino:

Sweden is viewed as an egalitarian utopia by outsiders, but reality is complex. In some ways Sweden has less social equality than the United States. While the American upper class is largely meritocratic, the upper class in Sweden are still mostly defined by birth.

Historically, Sweden, Norway and Finland alone in Europe never developed Feudalism (Denmark was closer to continental Europe). The Nordic nobility was a small share of the population and not as powerful as the nobility in continental Europe, though still influential. The upper class in Sweden today consists of the nobility and of wealthy bourgeoisie families that socially merged with them. Wealthy bourgeois families live in the same neighborhoods and have adopted similar behavior and identity as the nobility. Despite long Social Democratic dominance they remain a coherent social group, with a distinct and recognizable accent, way of dressing, values etc.

Belonging to the upper-class is not defined merely by wealth, depending more on blood. Just as in historical times, a Nouveau riche member of the middle class will not automatically be accepted as a member of the upper-classes, unless they actively adapt their behavior and are accepted by the upper-classes socially.

The upper classes in Sweden retain a disproportional hold on wealth and power. The formal nobility in Sweden constitutes around 0.2% of the population. A couple of years ago I looked through the list of the wealthiest Swedes. Fully 10% of the richest Swedes are members of the nobility. By contrast not a single one of the richest Swedes was a non-European immigrant. Of Sweden’s prime-ministers Sweden during the modern era 20% belonged to the nobility.

Sweden is known for income equality. Increasingly, studies also point to Sweden as a country characterized by high intergenerational mobility of income. Income-distribution and wealth distribution are however not the same thing. What some may not know is that wealth-inequality is relatively high in Sweden. The top one percent own around 35% of wealth in the United States. In Sweden, because of extensive tax evasion, the number is harder to calculate. When including estimates of wealth held outside of Sweden, Roine and Waldenström estimate that the top one percent richest Swedes own 25-40% of total wealth, not far from American inequality levels, and increasing more rapidly.

At the same time, the intergenerational mobility of top wealth is chokingly low. A recent studyfound that a astonishing 80-90% of inequality of top wealth is transmitted to the next generation in Sweden!

According to one studythe share of the richest Swedes who inherited their wealth is around, 2/3 with 1/3 being entrepreneurs, while in the United States it was the opposite, with 1/3 of the wealthiest inherited their wealth while around 2/3 are entrepreneurs.

Thus while the Swedish middle class is large and has a compressed earning distribution, at the very top you have a small number of aristocratic families controlling much of the wealth. Mobility into this group is rare, probably rares than it is in the United States. One reason are stronger informal class-barriers, merely earning wealth is not enough to be accepted a member of the aristocratic upper-class. Another more interesting reason may be the unintended effect of welfare-state economic policies.

During the era of Social Democratic dominance, they wondered how to deal with wealth inequality. The dilemma facing the Social Democrats was this: The upper-class business families did a very good job managing Swedish export industry, the key to Sweden’s wealth. This is especially true for the Wallenberg family, the leading industrial family in Sweden, controlling amongst others ABB, Ericsson, Electrolux, Atlas Copco, SKF, AstraZeneca and Saab and doing an excellent job.

The Social Democrats decided to accept the unequal distribution of assets, but simply make these assets worth less using punitive high tax rates. Because of high inflation capital taxes were often 80-100%.

The upper-class families still owned most of private industry, but because of taxes those assets were simply not worth much. Paradoxically the high taxes and capital regulations which prevented foreign investments seem to have helped freeze the asset distribution into place, with the share of wealth owned by the rich being fairly constant between 1970 to the 1990s.

The OECD also reports that Sweden is quite unequal in wealth, hat tips go to Old Whig and Luis Pedro Coelho.


The Wallenberg family controlled 42% of the market cap on the local stock exchange in the early 2000's. Not sure if still true.

A creatively destructive economy is going to threaten entrenched wealth a lot more than an ossified socialized one.

"A creatively destructive economy is going to threaten entrenched wealth a lot more than an ossified socialized one."

Excellent point, Chip. Have you seen any papers or books making this point with respect to the Piketty Bubble. Anyone else?

George Cooper: http://georgecooper.org/2014/05/12/cowboys-and-capitalism-schumpeter-vs-piketty/

If I am not mistaken, this is meant as a sorta-kinda reubttal to a part of Piketty's response to the FT, yet the post does not say so...?

No need to be. Every other post of TC recently has been about exactly that.

Assuming the claims above are true, they are a double-edged sword for Anglo-Saxon free-marketeers like me.

On the one hand, we can nod and say "I told you so" at evidence that egalitarian norms actually evolved to entrench inequality of social status. That is, they protect the aristocracy and keep those dirty, New Money Chavs in their place.

The flip side is that Sweden, and probably many other rich successful countries (ones as different as Japan and France) don't suffer from this racket. It seems like there is a genuine, workable and fruitful bargain where aristocrats buy stability (mostly of social rank) from the lower-middle class in return for income equality.

Uhhh.... Sweden has the same GINI as New Hampshire...

Taxation in Sweden is more regressive than that of any place in the US that I know of.

Err, yes, both of those statements are consistent with my prior belief. I don't get what they have to do with my comment.

>>It seems like there is a genuine, workable and fruitful bargain where aristocrats buy stability (mostly of social rank) from the lower-middle class in return for income equality.

If taxes are more regressive, how exactly are the aristocrats "paying"?

Is see. I mean that the gap (in wealth and income) between the aristocracy and the plebians is less than it might have been with other institutions, of which tax structure is only a small part. Yes a Swedish worker on $40,000 will pay more tax than in America, though she will get a bit more back in various government goodies. More important is that fact that membership of the Electrolux-owning class is less exciting than being a British courtier with shares in the East India Company.

"More important is that fact that membership of the Electrolux-owning class is less exciting than being a British courtier with shares in the East India Company."
What is this supposed to mean?

I pay taxes in Sweden. This might suggest a risk of mood affiliation, as taxes were filed three weeks ago!
The system is not regressive, it is quite progressive but rates top out at incomes that may seem small to you.
Median wage full-time wage earners pay 20% income taxes (employers pay a separate tax, 30% of gross wage expenditure for health care etc).
Marginal tax rate rises from 30% at low incomes to 58% at USD 90K.
Under most circumstances, the only deductible of significance is mortgage interest, rates actually payed are close to those advertised.
Small enterprise owners (I am one) are taxed both as their own employers and employees, top marginal tax on result after expenses 70%.
Corporate income taxes and income tax on dividends are never discounted; sum of taxation is 48% (OECD average 34%)
VAT is high and regressive but a complex subject because of exceptions, further all cash benefits, if counted as refundable tax deductions, cancel those effects.
There is not much household wealth inequality; during the reform socialism era 1965-1990 most household wealth was decimated by taxation and inflation. The 1% own mostly one or more houses; median wealth among the top 1% is USD 1.2 million.
So who owns all the capital in Sweden? The government (directly and through huge portfolio holdings), charitable foundations*, foreign investors including tax emigres, domestic small savers and finally a few billionaires of recent making.
*the Wallenberg family, and a few other dynasties, no longer own or draw income from "their" business empires, but remain as stewards.

"the Wallenberg family, and a few other dynasties, no longer own or draw income from “their” business empires, but remain as stewards."

What do they get for being stewards exactly?

Power. Lots and lots of power. And stature, admiration, all the things men seek really, except the ability to blow hundreds of millions on toys and palaces.

Well accually. By controlling the empire thru there foundation they can place themsleves on the boards of every large company they own. The effect is huge salarys and bonuses for the family.

So yes. Lots and lots of money also.

Numbers are for California:

Top income tax rate: ~52%

-For high earners primary deductions are home interest & charitable donations. Effective rate will likely be around 52%, but it can be 0% if they give everything away! (Paging Mr Buffett)

Corporate tax + tax on dividends: 97%

-For California based corporations doing business in California, this is basically the effective rate.

You forgot to include high regressive taxes in Sweden on: Alcohol, fuel, probably something else I'm forgetting. You can claim that people get their money back at the low end for the VAT, but that comes out of the total bucket of redistributive payments, does it not? No one is claiming that the welfare state in the US is more generous than that of Sweden, only that the taxation is more regressive. The claim I make is that people there are largely paying themselves.

And as mentioned before, US is the only country in OECD whose top earners can't avoid paying US taxes by leaving the country. Universal taxation for all high earning citizens!

We forgot the inheritance tax!

I believe it is 0% in Sweden?

50% in US.

My experience of Sweden leaves me with a very different impression than "the Wallenberg family, and a few other dynasties, no longer own or draw income from 'their' business empires, but remain as stewards." With a large capital base you can grow your generational wealth quite freely, while living on some of the nicest estates in Europe.

Taxes on capital income in Sweden are 30%, payable only to the national fisc, sans county tax. Agricultural real estate is barely taxed, and is the store of a great deal of the domestically-held wealth. A very large amount of the capital assets are held in offshore subsidiaries, joint-ventures, and other businesses and accounts abroad, often owned by foreign 'foundations': This income is not effectively taxed in Sweden. Children, especially eldest sons, almost always go to reside abroad for a number of years when young, during which they get their capital affairs in order. Sweden was very aggressive against the rich from 1965-1989. They found it backfired. It has all changed in the last twenty-four years.

There are easily 10,000 families in Sweden with more than $6 million in assets, and several thousand with vastly more. The government, in seeking to encourage business people to "come home," has made returning tax agreements (binding) which are advantageous to the returning rich. If you have capital as a Swede, you can certainly grow it, all the while living a fairly idyllic life on your Stockholm-region farm with major beautiful buildings, with your large sailboat and exceptional apartment/condo in Stockholm. And when this seems to pale, you can fly abroad and live as lavishly as you wish for a spell. The median "Svensson" family, on the other hand, sees almost all their annual income go to housing, food, cars, social taxes (health care, etc.) and so forth.

No feudalism? Technically, sure. But Sweden only abolished 'fee tail' on large estates (primogeniture) about twenty years ago. And even then it excluded five very large estates in land to continue in fee tail (fil a comis) because the properties (vast forest with castles) were considered national treasures unmanageable on any other basis. If you are part of the landed rich in Sweden, your worthy same-class cohort live scattered about the country. You had better send your children to one of the boarding schools, Lundsberg or Sigtuna, so that they can fully acquire the mores and habits of the .1%, and have some peer friends in adulthood. That's actually how its done. The world of rich Swedes is quite private, very clubby, and thriving. I am reminded of Warren Buffett's jibe a few years back, "There really is class warfare, and my class is winning." I don't think Bengtsson, Persson, Stenhammar, or Wallenberg would say that out loud in Stockholm, but they could certainly think it and smile. It's a world-wide phenomena, really. Capital can move, diversify across countries, change businesses. Labor really can't.

A very informative comment.

Let's not forget IKEA's owner lives in Switzerland and makes his money by having the IKEA brand name owned by an offshore company and licensed back to stores, thus laundering the profits.

I wonder how many other super wealthy Swedes live outside Sweden altogether? Sure, they don't count towards national statistics, but since they fleeing due to taxes, maybe they should count, as its a bit artificial.

"Thus while the Swedish middle class is large and has a compressed earning distribution, at the very top you have a small number of aristocratic families controlling much of the wealth. Mobility into this group is rare, probably rares than it is in the United States. One reason are stronger informal class-barriers, merely earning wealth is not enough to be accepted a member of the aristocratic upper-class."

I see! Merely having wealth is not enough to be counted among the wealthy! No, wait a minute, I do not see.

Yeah, I don't quite get it. Is the fact that it is hard to get socially accepted into Sweden's elite actually relevant to wealth mobility?

Its obviously relevant because if there were more mobility this kind of social norm would be much less likely to be sustainable. If you're used to the same people in your class circle its easy to be exclusionary. If on the contrary you're dealing with a large number of the nouveau riche every generation joining the same clubs and building up their own forms of social capital the old systems of privilege just tend to get washed away. A great picture of this kind of phenomenon is provided by Edith Wharton in her novels where a besieged nineteenth century American aristocracy is already seeing the sun rapidly set on their world

Inequality is inequality. Having distinct social classes even if they are not directly tied to wealth does not seem like a good thing.

One of the standard claims of those who oppose high wealth inequality is that the rich can control the political economy of the nation. But in Sweden being elite is MORE than simply being wealthy. In that sense, their effective power is greater than that for a group of comparable wealth in the US. IF all it takes to matter in the US is to earn a billion dollars that is easier done here than in Sweden where a billion buys you less influence without the upper class social acceptance. In that sense, the unmeasured sources on inequality in Sweden are more important and vastly less fungible than in the US which is mostly (though not entirely) tied to wealth and to a lesser extent education. Someone with noble connections but lower relative wealth in Sweden would be more dominant and more unequal relative to the middle class than a bumpkin from flyover country who struck it rich in (for example) the garbage business.

does swedish upper class social acceptance actually require wealth?

Yes, or you can't "join in" on all the "activiets". Hunting on estates, sailing, old car collecting etc. etc. A lot of upper class activiets in Sweden is based around "private events" in old houses and farms. If you can't entertain at one of these places your invites will stopp coming.

Do you know the average assets of a U.S. member of Congress?

Inherited power is less common in the United States than in a country like Sweden, perhaps. But, power is vastly more profitable in America than in Sweden. John Forbes Kerry entered public life penniless. The family money had run out, but the family name had not. It was enough to get him a Senate seat. From the that perch he built a net worth of $100 million.

Does that include the Heinz wealth?

Ketchup money is separate, but she did transfer close to ten million to him. His first heiress gave him some money as well, but the majority of his wealth is the result of insider trading and leveraging the power of the office. Being in Congress is very lucrative if you're smart about it. Some, for ethical reasons, avoid cashing in but they are the minority. John McCain and Harry Reid are two other good examples.

Political power leading to economic power is quite different from economic power leading to political power.

In fact this observation undermines the leftist arguments being put forth here.

John Kerry isn't independently rich. And his friends said that after being divorced by his first rich wife and marrying his second, he was practically homeless.

What Wiki said.

Being a plutocrat is only worth a damn if you actually live in a plutocracy, and not in some other kind of aristocracy.

Pretty sure being a plutocrat is worth a fair amount of damn no matter where you are.

Small countries frequently seem to have significantly different attitudes toward their wealthy/corporations than large ones. Economically, small countries see themselves much more in terms of international competition. Many Americans see corporations like GM and Ford as the enemy in terms of inequality, but Swedes likely view Saab in nationalistic terms as "their" car company. Its success raises their status in comparison to other countries (I have no specific knowledge of Sweden here, so correct me if I'm wrong, but have seen this at work elsewhere). Even the number of rich people your country contains might be a sign that you are "winning" economically in comparison with other nations.

Thus, small countries, even with leftist politics, tend to offer incentives to their local corporations rather than trying to apply redistributive policies to them. I would imagine that this would have the effect of increasing wealth inequality.

Small states in America have different dynamics that larger states. Size matters.

This is just one problem of comparative economics. Minnesota is a lot closer to Sweden in terms of culture and economics than it is to Britain. New Hampshire, is not all that like Sweden. The differences are rooted in the people who settled these states. Drinking habits show this quite clearly. If you look at one of Colin Woodard's maps of the US next to a map of alcohol consumption, it jumps off the page.

America is a house with many mansions.

Are any of the mansions more 'real American' than the others?

dan1111, that is so true, and applicable to Sweden. Shortly before the turn of the 20th century the Swedish government intentionally followed a policy of encouraging domestic monopolies, so that Sweden would have businesses with a strong domestic base that could compete against the U.S., U.K., and German companies. That is the well-spring from which emerged the Erikssons, Wallenbergs, et al.

Sweden is a very weird country with a very unique history. It isn't even all that much like other nordics.

These days we know anyone trying to explain Asian development by using Japan is not qualified to explain anything, when will the good and great realize that Sweden is something very weird.

Also Sweden and the Nordics did have feudalism, more than many European states, it was just dismantled earlier there through a very early appearence of absolutism. As to Serfdom, there were practices that were indistinguishable from it in Norland and especially Finland into the 19th century.

Every country is weird. One must take care in applying insights from one country to another. However, one can't reject a comparison simply by saying "this country is weird, so you can't use it as a data point". It is necessary to explain what it is about Sweden's weirdness that invalidates the comparison.

Sweden's implementation of progressive policy is one of the most extensive (and often viewed as one of the most successful) in the world. Further, it is near the bottom of income inequality according to common measures. If wealth inequality remains quite high despite this, then this is surely an interesting contribution to the discussion.

If culture matters, you should.

"As to Serfdom, there were practices that were indistinguishable from it in Norland and especially Finland into the 19th century."

No, there weren't.

Manorial courts and jurisdiction? No. Bondage to land? No. Did many suffer cruel treatment and exploitation? Many did, and there was probably more illegality in distant and outlying regions. More feudalism how, and more than in which European states?

Don't dismiss the remote parts of the country, that was where all the mines that payed for everything came from.

It didn't make it past the 14th century but it existed, esp in Finland, where it lasted far longer, they had manors too. In Southern and the non German bits of Eastern Europe feudalism didn't really exist at all.

As to serfdom, that is a matter of hair splitting. Forced labor, needing a license to travel, quotas set on forest products to pay a rent on a hut you are not allowed to abandon. Being required to produce for mines and then arrested when you run away and marched to another province to work for a mine there. All of that is my family history. Of course Sami and Finnish origin helps here. Of course it is better now, it was better by the 1820s-30s, but it existed.

As to social mobility, on the other side of my family are gentry and the value to them of hereditary connections is incalculable. It helps with administrative and military careers, serves as an automatic introduction to society, and is very helpful in the professions.

It is difficult to convince people who don't know upper-class Sweden, who only think of social democracy and blondes, but my view of egalitarian democracy in Sweden is purely this, that it arose from the terrifying misery of living through the dark cold winters under the heel of Swedish aristocrats. I still see it today. You haven't experienced self-confident arrogance until you've spent time with among the Swedish upper class. It's tolerable if you're moderately rich yourself. However, if you're a commoner in the district you'll come to feel humiliated on a regular basis. And even Swedes will tell you that envy is the most powerful emotion in the country. Only recently, really, in the last fifty years, was taking joy in inspiring envy in the masses toned down a bit for practical reasons. I really think smugness is the chief private pleasure of prosperous Swedes. To have everything 'precis lagom,' with money to spare and an enviable property, is heaven on earth to the Sweden. I like them, by the way, but they are what they are.

No one is saying that the lower classes didn't have it tough in Sweden or Finland, but 'feudalism' refers to very specific institutions that simply didn't exist there. 'Feudalism' is not a generic term that describes any class-based rural society.

Read Jaakko Raipala's comments in this thread: http://hbdchick.wordpress.com/2014/03/10/big-summary-post-on-the-hajnal-line/ He explains well why what Roy refers to feudalism was often more like very pure capitalism.

Tyler on Piketty -> cognitive dissonance

Piketty argues that the tendency within capitalism is for wealth to concentrate at the top. This is only rolled back when there is large asset destruction such as during wars. Sweden was neutral during WW2 and emerged unscathed.

Might this support Piketty's argument?

And WW1. In addition to the lack of asset destruction, I suspect mass conscription in wars that killed indiscriminately and provided training to those that survived contributes some churn that upsets economic hierarchies.

Swedish elites treat me like raggare despite millions in book sales.

Karl, you're beginning to sound like Michel Houellebecq. Any possibility of an island novel... you know, like, away from the family?

Karl-Ove, please befriend the swedish elites and write an other book about it in 10 years. I would read that one also :)


Well of course they do. What's the point of it all if they don't?

Isn't the difference between capital which is taxed at 80%-100% and capital which has been redistributed a legal nicety? Like saying "The cow is yours, but the meat, milk and profit from sale are mine".

Gregory Clark's "The Son Also Rises" has a chapter on the surprisingly low social mobility in Sweden, as evidenced by surnames. Here's Matthew Yglesias' summary of Clark's research:


Some 2/3 of Sweden's poor are immigrants - a rather recent phenomenon.

How has this exacerbated the gap between rich and poor?

It could be, for example, that non-immigrant income mobility is rather fluid, but the data is skewed by the static earnings of immigrants.

It really depends on what type of imigrants you have... they are largely people from eastern europe or refugees from countries fustigated by war. What I see among people that I know, is that if they were middle class in their origin country, they will likely move to middle class in the next generation. But if they were poor, they will very likely remain poor...you can not really ask some albanian farmer with very low educational background, to have kids which will become, let's say, computer scientists.

I was in Sweden last year and looked it up. Most immigrants are arriving as refugees from the Middle East and outside the EU.

This has led to chronic poverty and the riots.

That's why I was wondering if the static income in this strata was affecting mobility stats.

Yep. Most are from the Maghreb and similar. The social democrats decided immigration was the key to voter strength. The industrial upper class decided immigrant labor was their only path to wage relief. Reminds me very much of the 'immigration reform' industry in the U.S., with the same pool of supporters and the same saps that can't oppose it without being labelled racist. It almost makes me laugh.

"The top one percent own around 35% of wealth in the United States. In Sweden, because of extensive tax evasion, the number is harder to calculate." So in US there is not extensive tax evasion. Let me laugh... So let me ask you one question, would you prefer to be poor in the US or in Sweden ??? ;)

Being poor is better in Sweden, but if you're above the 10th percentile in income, you will probably be much better off in the US: http://www.tino.us/2010/03/the-super-economy-in-one-picture/

So there is a 90% probability that I will be better off in Sweden? ... Well, I guess I should move to Sweden then.
I also wonder if the working hours in the top 10% in the US is the same as in Sweden...

Uh, no. It's the other way round.

You have it backwards. You have a 90% probability of being better off in the US.

I dunno about top 10% but average working hours are significantly higher in Sweden

I would be curious about a "Gini coefficient" of working hours as well. My gut is that in America there's a wider spread. Higher income people work lots of hours, while low income people work very few. (can recast that as high productivity/low productivity if you like). Whereas in somewhere like France the vast majority work 35 come hell or high water (although there are exceptions to the 35 hour rule, many of which involve relatively high-income managerial professions). So "average" can be misleading if one group is 0, 0, 70, 70 and the other is 35, 35, 35, 35.

'dunno about top 10% but average working hours are significantly higher in Sweden'

Somehow, that seems contradicted by this basic information - '25 work days minimum, plus 13 public holidays (some of which fall on a Saturday or a Sunday) and three de facto holidays (two of which may fall on a Saturday or a Sunday). Additional leave, often called arbetstidsförkortning (English: shortening of work time), typically 5-10 work days per year, is available for many Swedish employees.' http://en.wikipedia.org/wiki/List_of_statutory_minimum_employment_leave_by_country

Unless one believes that the Swedes are working 45 hours a week to make up the more than 6 weeks of vacation/holiday time they are legally entitled to.

Which this would seem to contradict - 'People in Sweden work 1 621 hours a year, less than the OECD average of 1 765 hours. Only 1% of employees work very long hours, much less than the OECD average of 9%. In Sweden 2% of men work very long hours, compared with 1% for women.' http://www.oecdbetterlifeindex.org/countries/sweden/

As for the U.S. - 'People in the United States work 1 790 hours a year, more than the OECD average of 1 765 hours. Around 11% of employees work very long hours, higher than the OECD average of 9%, with 16% of men working very long hours compared with 7% for women.' http://www.oecdbetterlifeindex.org/countries/united-states/

Depends on what state I would have to live in.

I would rather poor in Massachusetts than Sweden but in Sweden rather than Mississippi.

Real per capita income in Massachusetts is 177% of that in Mississippi.

You need to consider PPP and of course weather. It seems to me that many poor people make their way here to Florida after a layoff or whatever thinking it is better to be poor in Florida than Massachusetts. Also note black Americans seems to do much better in Georgia than in Massachusetts.

The late Stieg Larsson railed against the Swedish upper crust in his books (Girl With the Dragon Tattoo, etc.) Readers of his series will get a taste of the issues outlined in the post above.

Weird books man, talk about projecting. The upper class is outwardly reasonable and respectable but secretly tortures and rapes women in a secret dungeon (?!?!) Luckily there is an unremarkable leftish failing journalist - who bears, perhaps, a slight resemblance to the author? - who, along with being inexplicably irresistable to every woman he meets, is able to foil the aristocracy's nefarious doing. I don't know if I'd accept that glorified autobiographical fan-fiction at face value as an unbiased and accurate understanding of the Swedish class system.

I also found the book to be far less than it was hyped to be.

Does Sweden have anything like the UKs ASBOs, yet?

So, to sum up -

Sweden is viewed as an egalitarian utopia by outsiders, but reality is complex. In some ways Sweden has less democracy than the United States. While the American upper class is largely meritocratic, the aristocratic class in Sweden are still mostly defined by birth.

Not to mention being ruled by a king. People who think Sweden is actually a social democratic country are simply ignoring this reality when comparing Sweden to the paradise that is American democratic representation.

(And here is a bonus fact about Sweden 'democracy' - all tax returns are public, meaning that all tax information concerning any Swedish citizen is accessible to all Swedish citizens.)

Don't forget, based on the last paragraph, the small upper are taxed heavily and their assets aren't therefore worth as much, and their status is based on inherited social standing, not wealth.

Hmmm. They pay high taxes, they and everyone else fund government services that allow everyone to reach their potential, and there is no lower class from which one has to be mobile from.

Math question for today: as the gini coefficient goes to 0, rather than 1 (maximal inequality), does social mobility decline? (Hint: as there are more in the middle class, and fewer poor people, is there by definition more or less social mobility, particularly when the upper class is defined, not by wealth, but by titles, etc.).

I think with a Gini coefficient of 0 your social standing will be wholly determined by the number of reality TV shows you've starred in

So where do all the expat swedish people that I run into fit into your story? Recent immigrants to Canada. I worked with one for a few years, and worked for one. They both were young men and saw no opportunity, so they came to Canada.

Welfare payments do not allow everyone to reach their potential. Otherwise the Canadian native indians would be the most successful population by any and all measures in North America.

Yes, the aristocratic class is mostly defined by birth? 100% defined by birth I would say, according to definition. But is noble birth synonymous with upper class? Perhaps in the 14th century, before the rise of the merchant and later capitalist classes. Is the American upper class meritocratic? The very notion of class is that it is inherited, or are all children classless until adulthood? I agree that money contributes a bigger share of social status in the US than in Europe, probably because the other contributing factors depend on people agreeing on ideals for manners and behaviour. Even so, the effects are at the margin; billionaires are upper class and janitors are lower class everywhere but someone retiring with a million or two could be upper class or not depending on family, educational and professional background.

IKEA's owner lives in Switzerland and avoids taxes by having every IKEA store license the IKEA brand name from some Dutch corporate vehicle, thus avoiding national taxes all over the world.

Put that guy back in Sweden and now what?

Also, folks, note that the headline for the post is WEALTH inequality, not INCOME inequality.

Assets serve as a balancing wheel for income fluctuations in countries with a poor social safety network, and the lack of assets for lower income people in those circumstances is meaningful. But, in countries with stronger safety nets, having fewer assets means less in terms of income or social security.

Not to mention being ruled by a king. People who think Sweden is actually a social democratic country are simply ignoring this reality

So Belgium, the Netherlands, Norway, Denmark and Luxembourg aren't social democracies either because they're monarchies?

Well, following the logic of the post, I assume they all have higher levels of some form of inequality (take your pick of which variety, as this web site is never bothered by the hobgoblin of consistency) than the U.S.

Why the need to write in such loose terms? Why not just look at the data?

Based on the referenced OECD study, table 4, the 99/50 ratios for wealth:

Canada: 30.3 (832,144/27,486)
Germany: 30.5
Italy: 13.3
Sweden: 23.8
US (PSID): 53.3
US (SCF): 94.9

Sweden has the second lowest wealth inequality in this (ridiculously small) sample. The conclusion is the same if one looks instead at the Gini coefficient (table 7).

Which basically means that the title of the post might as well been : "Sweden has little wealth inequality"

Estimating the top wealth share in Sweden is more challenging than the United States. Sweden a small open country close to Europe with capital regulation and tax laws which make it very easy to move wealth abroad. Around one third of Sweden's wealthiest have personally moved abroad, a far higher share than most other western countries.

This is reflected in wealth-distribution estimates. From a methodical study on the topic cited by Piketty: "Wealth Concentration over the Path of Development: Sweden, 1873–2006”, Scandinavian Journal of Economics. http://www.uueconomics.se/danielw/Research_files/RW_Wealthconc_SJE_2009.pdf

"Table A2. Top percentile share of marketable wealth after adding foreign, super-rich and retirement wealth"
Top 1 percent share in 2006 goes from 19% to 40% if wealth hidden abroad etc is added.

Quite right, the capital held by emigres and their descendants has of course escaped (Swedish) taxation and so one would assume it accumulates faster, but who can say which country's policies are responsible for that inequality? Taxation is optional for the super-rich in our post-regulation world, one of the reasons Piketty gives for why inequality is set to spiral. If so national comparisons might soon be pointless.

Yes. And I've laughed at myself sometimes when I conclude that Sweden today functions like it did in the Viking Age. It encourages the going abroad to build businesses, bringing home only what you wish. The economy is extremely dependent on a favorable balance of trade, and therefore it cherishes and coddles its key builders of global wealth extraction. Quite sensible, really. The rest of the world hasn't got the time or bandwidth to focus on the successful strategy of one small country up north with a bare 9 million inhabitants.

The aristocratic class in the US is also 99% defined by birth...maybe add a few jewish immigrants and a couple of entrepeneurs but these too have a good background... The only segment where this is likely not true is in the entertainment industry, but I suppose this also holds for swedish entertainment industry (if there is one)

There is no aristocratic class in the U.S.

There is, you just don't refer to them as dukes and counts.

Like who? Are the Waltons aristocrats? Because I'd question any definition of aristocrat that goes from zero to duke in one generation.

One thing that I wish MR would find a way to do would be to somehow flag idiotic posts like the above...

Wealthiest Americans....

1. Waltons - Sam Walton was poorer than dirt when he started WalMart-yes his progeny have a ton of "wealth" - but he started out pretty close to zero - and not all that long ago.
2. Gates - came from solidly middle class - but hardly wealthy roots.
3. Jobs - adopted by a very normal middle class family.
4. Buffet - father was a congressman - not rich - Warren was rejected by Harvard Businss School.
5. Larry Ellison - born to an unwed Jewish Mother - adoptive Father made a fortune in Chicago Real Estate only to lose it during the Depression.
6. Steve Ballmer - Affluent - but far from rich parents - but just put up $2B to buy the LA Clippers - only in America.

Each of the above has not only become wealthy on their own - but created lots of millionaires in their "wake" - tons of Apple, Oracle, and Microsoft employees find themselves holding stock worth millions - thanks to the "entrepreneurs" who took the risks and reaped the rewards.

I just don't see how we become a better country - or economy if we close the paths that these folks walked to their well earned wealth.

I am open to much higher inheritance taxes - and perhaps some higher marginal tax rates on ultra high income and ultra high wealth [the devil is in deciding what qualifies as ultra high]. But the "good" that comes from making sure we have equality of OPPORTUNITY is preferable to the alternative that is Sweden - where we get equality via devaluing and making inaccessible the opportunity.

Dear Lonely,

Or, what you may be illustrating is an example of poor corporate governance....Larry Ellison, ripping off the company; Sam Walton and clan running the corporation for themselves.

Lonely Libertarian, remember that SHAREHOLDERS own these corporations, and management, because of poor governance policies, have taken YOUR property as a shareholder and enshrined it as their performance.

Re Walmart:
"Shareholder advisory firm ISS strongly disapproves of Walmart Stores Inc.’s corporate governance, assigning it “8” on a 10-point scale where 10 indicates the highest level of risk. In its report on Walmart, ISS criticized the Bentonville, Ark.-based retailer for lack of transparency about its bribery problems, and recommended “no” votes on chairman S. Robson Walton and director Michael T. Duke, formerly chief executive officer. The advisor also called for a “no” vote in the say-on-pay ballot, citing several issues of which the “most troubling” was moving the goal posts on pay-for-performance by retroactive adjustments to incentive plans that had the result of rewarding executives despite performance declines."

Re Larry Ellison:
"Mr. Ellison’s cumulative pay for the eight years that Equilar, an executive compensation data firm, has been conducting the study was $582 million, almost $83 million more than the runner-up, Tim Cook of Apple. Through a spokeswoman, Mr. Ellison declined to comment about his pay or anything else.

Shareholders of Oracle, perhaps noticing that its stock performance has been relatively unimpressive, are finally getting grumpy. They voted against Mr. Ellison’s pay package a few weeks after his team triumphed again in the America’s Cup.

It was the second consecutive year that shareholders rebelled. But because the resolution was nonbinding, it made no difference....
Compensation of $78.4 million is hard to visualize. Better to think of it as $37,692.31 an hour, based on a 40-hour workweek. Sure, he gives money to his charitable foundation, but basically his is a fortune that endlessly renews itself."

How much of that is in stock, which if he performs as poorly as you claim, will go down?

And he probably works a bit more than 40 hours a week, with a wee bit more stress than being a guy who issues dog licenses.

BTW, what's Oracles' revenues?

I highly suspect that pay is correlated to the size of revenue being managed. And I would bet there is a reason for that. Maybe its too high and you could get away with paying a 10th, but then again - its not your money.

One interesting point about your $37,000 / hour number is how much Hillary Clinton makes...for giving a simple speech. Obama will make hers look like chump change when he retires.

But Bill - if I understand Picketty - and those who seem to like his line of thought they attribute income inequality and wealth inequality to being "advantaged" by birth - they say nothing about bad corporate governance.

As I said in my original post I have no problem with more aggressive inheritance taxes (would deal with second and third generation Walton's).

I did not mention it - but I would be open to tighter restrictions/taxes on executive pay/compensation.

And here is one that we never here about - we get lots of comments on the unfairness of taxpayers funding stadiums and arenas for sports teams. These are always directed at the owners. What about the players - they get astronomical salaries to play in venues paid for at least in part by taxpayers - shouldn't A-Rod have to pay part of his outrageous contact to a fund to a offset taxpayer funding of ball parks and stadiums?

Why is income inequality the focus of so much discussion and not the quality of life of a society's most vulnerable members?

Of course, inequality inspires more passion than focusing on the poorest's outcomes. I'm not exactly sure why, but perhaps we are motivated more by envy than we are by empathy. There's also the suspicion that the top steals from the bottom (which in the aftermath of 2008 is not a completely ungrounded claim). And yet, in the long run, I think ultimately poor people's absolute welfare matters to me more than their welfare relative to the top.

A quantitative illustration: which society would you rather live in?
Society A: bottom 20% earns $30k, top 1% earns $1M
Society B: bottom 20% earns $20k, top 1% earns $10M

Obviously A does a better job with the bottom 20%, and yet many people would think B has more income inequality. Does anyone know how countries compare on this measure? The closest thing I can find is this

But I'm not sure I trust each country's own definition of poverty. I'd love to see something that shows a comparison of the bottom 20%'s access to indoor plumbing/electricity, literacy rates, high school completion, mortality.

Keep in mind that in California, you can be in the top1% and be a government employee. We had a guy run a tiny school district of 6 high schools make $300,000 per year. I don't even want to imagine his pension costs.

Personally, I think looking at absolute numbers as you suggest makes far more sense.

Subjectively, many people with low income simply want to work less, or have less stress. They may find playing WoW at night their greatest pleasure. Maybe they don't want to be have to make interminable business trips. I abhor those, personally.

One reason to have a guaranteed income of some sort is that it's focused on the poor, and it's relatively easy to find out who is really poor. All this discussion about inequality has shown that it's a fairly subjective and messy concept, which, over time, leads to legislation that never quite gets to the problem. How can it, since, for some of us, the issue is mainly one of political influence. As things stand now, I still feel that the wealthy and influential are very comfortably watching the performance with amusement. The little people just can't seem to focus enough to present a problem. On to the next course, waiter.

Significant that this goes after P's weakest argument, not his strongest ones?

Not really; isn't susceptibility to criticism the very the definition of weakest argument vs strongest?

It's one of his weakest, but also one of his more revealing.

For all his time with the data, he still idealizes Sweden in the same fact-free mood as do college sophomores at Berkeley or Columbia: "Of course life in Sweden is GOOD and in the UK it is BAD; Sweden SHARES and the UK is GREEDY."

First of all, one thing that the most recent exchange between Piketty and Giles should show is that it is really hard to measure both wealth levels and degrees of its inequality in any society, with many of the sources highly unreliable. So, how unequally wealth is dsitributed in Sweden, as well as how closely this is tied to the ongoing formal existence and apparent power and prestige of its aristocracy, is less than clear.

That said, as someone who personally knows people from those strata in all three countries, I would say that comparing Sweden with France and Japan as was done above is interesting on several grounds, avoiding any generalizations about their respective wealth inequalities or how accurately they are measured. All three of these nations exhibit a pattern of extreme elitism in terms of power at their tops, with some of this tied to social class, even if this is not so obvious in some of them. Let us take it that it is more obvious in Sweden, but consider the other two.

In both France and Japan one has a pattern of massive dominance by a narrow elite that lives in the primate city of the nation, respectively Paris and Tokyo. This elite dominates government, business, academia, and other leading sectors of society and economy. In both there is a meritocratic cover through links to a leading academic institution in the primate city, ENA in Paris (hence the "enarques"), and the University of Tokyo in Japan. Once into the upper reaches of this elite, individuals notoriously move around among the tops of the various sectors, from government leadership positions to business leadership postions and so on back and forth. Furthermore, while there is more surface and real meritocracy in whom these people are, social background remains very important in both. France may have abolished monarchy and official aristocracy in 1848 or (or 1870, for those who want to get fussy), but social class remains extremely important in Paris and a predictor of being an enarque. Just count the numbers of such people who carry a "de" at the beginning of their last names, and also go read Proust, even if he is now a century out of date. The social views expressed there continue to substantially live in the haute realms of Parisian society and power structures.

In Japan there remains an emperor, but the formal aristocracy basically lost official position wtih the Meiji Restoration in 1868. Nevertheless, the amakudari syndrome in Tokyo looks very similar to the sort of circulation of elites that one sees in Paris. I must grant that probably inherited wealth plays less of a role in all this and perhaps in the overall wealth distributions of France and Japan than in Sweden. But nobody should be fooled into thinking that past aristocratic connections or more general social class in Tokyo do not assist one to enter into that elite realm of the uber-elite any less so than in Paris or in Stockholm.

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